Don’t Let The Bank Steal Your Money

The bank is losing money in a short sale, so to lessen their loss, they may try to steal from the Realtors. In the short run, they make a little more on one deal if they can take some of the commission. In the long run, they make much less money because many less Realtors are willing to participate in short sales.

In a panel presentation at the REOMAC fall conference in Hollywood Florida, one of the top executives with Freddie Mac explained that it is Freddie Mac?s policy to prevent cutting Realtor?s commissions in short sales. In the long run, more Realtors will do short sales, and banks make more money in a short sale than in a foreclosure, so it is a better business practice.

If you talk to any Realtors who do short sales, they can tell you that many banks want the short term theft instead of the better business practice. For example, CitiMortgage held a third trust deed on a short sale I closed on a property in California. They had the application for months, indicating that our proposal had a good chance of being approved. WAMU, the holder of the second trust deed loan that was taking a short payoff, did not want a large payoff to CitiMortgage?s third loan, because WAMU felt any additional money should go to them. CitiMortgage?s stalled their response by claiming that it took almost a month to check to see if their loan was secured by a third trust deed or a second trust deed.

I had sent them a title report and copies of the trust deeds showing the dates they were recorded. In other words, CitiMortgage could read the recording dates on the deeds of trust and know if they were second or third. There was a deadline for the sale imposed by WAMU who was foreclosing on the first loan and also had the second trust deed loan. With less than a week before that deadline, CitiMortgage asked for ten times the payoff that had been proposed. In other words, they pushed the Realtors up against the deadline with stall tactics, then demanded a huge increase in payment.

We proposed five times the payoff, with most of the money coming from the Realtor?s commissions. The loss mitigation negotiator indicated that they would recommend our proposal for approval, after being uncommunicative for two precious days. In a hardball tactic, CitiMortgage demanded the full ten times the proposed payment in a fax two days before the required closing date. The loss mitigation negotiators for CitiMortgage, and their supervisor, would not return phone calls or emails to explain or negotiate this demand.

So, the Realtors reduced the commission by 25% to give in to CitiMortgage?s negotiating techniques. How do you think the Realtors will feel if they have an opportunity to do a short sale with CitiMortgage again? All I did was postpone a foreclosure three times, negotiate short payments on the second and third loan, negotiate a discount payoff on a fourth judgment lien, payoff back property taxes, handle the transition of Chase acquiring WAMU in addition to keeping a difficult seller, a young buyer and four Realtors working together. With the time I spent over 5 months, it feels like I received less than minimum wage per hour for a service that takes extensive negotiating talent.

I do count my blessings, because it could have been worse, as we did get the sale closed.

When you start the short sale process, discuss the company policies concerning commissionectomies. Go over their procedures for evaluating the net proceeds of the sale, and discuss how that does not involve squeezing the life out of the Realtors. Every time you call the short sale department make sure it is noted in their system, with a list of all your efforts to make this sale work. In short, first establish that they are not supposed to steal your money, then show how much you have done for them to get as much as they have. If that does not work, go to the REOMAC and Five Star Conferences to spread the word.